The cost of capital reflects the cost of financing and is the minimum rate of return that a project must earn to increase firm value.

Question

Quizplus · Accepted Answer

The cost of capital is the minimum rate of return that a project must earn to increase firm value. It reflects the cost of financing as it factors in the cost of debt, equity, and any other sources of financing used by the company. Therefore, the statement is true.

The Cost of Capital Reflects the Cost of Financing and Is